First Community Corporation Surges in Q2 2024: A Peak at Financial Excellence and Strategic Growth

A Comprehensive Analysis of First Community Corporation's Second Quarter Performance and Strategic Financial Moves

In the dynamic world of finance, keeping a pulse on the latest earnings reports, dividends, and strategic movements of key players is essential. First Community Corporation, the holding company for First Community Bank, has recently announced its second quarter results for 2024, and the numbers tell a story of robust growth, strategic financial management, and an unwavering commitment to shareholder value.

Key Takeaways:

• Net income for Q2 2024 was $3.265 million, marking a 25.7% increase from the previous quarter.
• Increased quarterly cash dividend to $0.15 per share.
• Strong regulatory capital ratios exceeding minimum requirements.
• Substantial growth in loans and deposits, reflecting strategic financial management.
• Continued focus on maintaining high asset quality with low non-performing assets.

Financial Performance Snapshot

First Community Corporation reported a net income of $3.265 million for the second quarter of 2024, a significant increase from $2.597 million in the first quarter of 2024. This represents a robust 25.7% growth on a linked quarter basis. The diluted earnings per common share were $0.42, up from $0.34 in the previous quarter. Year-to-date, the net income through June 30, 2024, was $5.862 million, although slightly down from $6.790 million during the first half of 2023. Diluted earnings per share for the first half of 2024 were $0.76, compared to $0.89 during the same period in 2023.

Dividend and Capital Management

The company's Board of Directors approved an increased cash dividend of $0.15 per share for the second quarter of 2024, payable on August 13, 2024, to shareholders of record as of July 30, 2024. This marks the 90th consecutive quarter of cash dividends, underscoring the company's commitment to returning value to its shareholders. According to First Community Corporation President and CEO Mike Crapps, "Our entire board is pleased that our performance enables the company to continue its cash dividend for the 90th consecutive quarter."

In addition to the dividend increase, the company has a share repurchase plan in place, allowing for the repurchase of up to $7.1 million of its common stock, representing approximately 5.3% of total shareholders' equity as of March 31, 2024. No shares have been repurchased under this plan yet, but it provides flexibility in managing capital going forward.

Strong Regulatory Capital Ratios

First Community Corporation continues to maintain strong regulatory capital ratios, reflecting prudent financial management. As of June 30, 2024, the bank's regulatory capital ratios were as follows:

• Leverage Ratio: 8.44%
• Tier I Risk-Based Capital Ratio: 12.55%
• Total Risk-Based Capital Ratio: 13.62%
• Common Equity Tier I Capital Ratio: 12.55%

These ratios exceed the well-capitalized minimum levels required by regulatory statute, ensuring the bank's financial stability and resilience.

Loan and Deposit Growth

The second quarter of 2024 saw significant growth in the company's loan and deposit portfolios. Total loans increased by $31.9 million during the quarter, representing an annualized growth rate of 11.1%. This growth was driven by increases in the commercial loan portfolio ($14.2 million), residential mortgage portfolio ($12.9 million), and consumer loan portfolio ($4.8 million).

Total deposits at June 30, 2024, were $1.605 billion, up from $1.578 billion at the end of the first quarter. Excluding brokered deposits, total deposits were $1.562 billion, reflecting an annual growth rate of 11.7%. Pure deposits, defined as total deposits less certificates of deposits, increased to $1.319 billion, a 6.3% annualized growth rate. Non-interest bearing accounts also saw a healthy increase, representing 28.7% of total deposits at the end of the quarter.

Asset Quality and Loan Portfolio

First Community Corporation continues to prioritize asset quality, with non-performing assets at just 0.04% of total assets and past due loans at 0.07% as of June 30, 2024. The company reported non-accrual loans of $173 thousand, which is only 0.01% of total loans. Net charge-offs, including overdrafts, were minimal at $5 thousand, while net loan recoveries, excluding overdrafts, were $1 thousand for the quarter.

The company has a diversified loan portfolio with no significant individual or industry concentrations. As of June 30, 2024, the commercial real estate exposure included:

• Retail loans: $91.5 million (7.7% of loan portfolio) with a weighted average loan-to-value (LTV) of 55%.
• Warehouse & Industrial loans: $78.0 million (6.6% of loan portfolio) with a weighted average LTV of 61%.
• Office loans: $66.4 million (5.6% of loan portfolio) with a weighted average LTV of 57%.
• Hotel loans: $65.2 million (5.5% of loan portfolio) with a weighted average LTV of 63%.

The company has only four office loans where the collateral is an office building in excess of 50,000 square feet, representing $10.6 million in loan outstandings with a weighted average LTV of 34%.

Revenue and Net Interest Margin

Net interest income for the second quarter of 2024 was $12.7 million, up from $12.1 million in the first quarter and the second quarter of 2023. The net interest margin, on a tax-equivalent basis, was 2.93%, reflecting a 14 basis point increase from the previous quarter. This improvement was driven by higher yields on loans and an improved earning asset mix.

The company also benefitted from a pay-fixed/receive-floating interest rate swap agreement, which positively impacted interest on loans by $668 thousand during the quarter and $1.3 million year-to-date.

Non-Interest Income and Expense

Non-interest income for the second quarter of 2024 was $3.642 million, an increase of 14.4% from the first quarter and 19.4% year-over-year. The mortgage line of business saw total production of $49.0 million, the highest quarter since 2020, with fee revenue of $659 thousand. The investment advisory line of business also achieved record assets under management (AUM) of $865.6 million, generating revenue of $1.508 million for the quarter.

Non-interest expense was $11.843 million, a slight increase from the previous quarter. Salaries and benefits expense rose due to higher variable compensation expenses and annual increases for exempt employees. Other expense categories saw modest increases, offset by a decrease in marketing expense.

Strategic Management and Future Outlook

First Community Corporation's strategic management and focus on financial stability have positioned the company for continued success. The company's ability to grow its loan and deposit portfolios, maintain strong asset quality, and deliver consistent returns to shareholders through dividends and potential share repurchases highlights its commitment to long-term value creation.

As the company navigates the evolving economic landscape, its proactive approach to capital management, asset quality, and revenue diversification will be critical in sustaining its growth trajectory. Investors can take confidence in First Community Corporation's robust financial performance and strategic initiatives, positioning it as a formidable player in the community banking sector.